Economic Growth, Income Inequality and Subjective Well-being: Evidence from China

This paper examines the subjective consequence of rising income inequality amidst the rapid economic growth in China. Based on the data from a national representative survey conducted in 2005, we employ multi-level models to show that, while personal income improves life satisfaction, the effect decreases with the level of local economic development; moreover, the rate of local economic growth has a positive effect, but local income inequality has a negative effect, on individuals' life satisfaction. Our findings help to clarify the mixed results in previous studies and point to the importance of both economic and social policies in improving people's subjective well-being in China's transitional economy.